The Sandcastle and the Coming Storm, Part 1

Lo and behold, the government isn’t the only one in debt here in the U.S. In fact, private household debt is currently around $13.15 trillion, that is, about $7 trillion less than the government debt. Household debt consists of mortgage debt and consumer debt. This is money that Amerikans owe on their homes and on their credit cards. Although household debt is lower than government debt, this is still a massive sum of money and it demonstrates that the debt problem is far bigger than what we are led to believe by the media and Washington.

Another component of the U.S. debt is the non-financial corporate and business debt, which totals $14.06 trillion. This consists of all the money that non-financial corporations and businesses owe to banks and other creditors. It is significant to note that it is exactly the corporate and business community, the capitalist class, which is yelling the loudest for fiscal responsibility and the curtailment of government debt in the current crisis. These shameless hypocrites claim that the governments’ fiscal negligence was the cause of this economic recession, when they are borrowing money on just as large a scale as big brother. The truth is that debt is the main driving force that keeps capitalism alive, and it is so endemic to the system, that the capitalists themselves must assume more and more debt to continue expanding.

Finally, we come to the financial debt, which stands at $13.838 trillion. The financial debt consists of all the money that banks and other financial institutions owe to other banks, financial institutions, or governments. Ironically, it was the bankers and finance capital that were principally responsible for the 2008 economic recession, but they too attempt to lay the blame at the feet of the federal government. It is true that government policy was partially responsible for unleashing the forces of financial speculation that led to the housing bubble and the subsequent credit crisis, but these policies were in fact enthusiastically advocated by the bankers and finance capital, who financed political campaigns to ensure that financial markets could by liberalized and deregulated. In all actuality, the government and finance capital is so intertwined that it is futile to blame one or the other for the financial crisis. Besides, it is silly to blame bloodsucking capitalists and politicians for doing what is necessary for them to make more money and stimulate “more economic growth,” the mantra of the day.

Now when all of these components are added up, the total U.S. Debt is an astounding $61.24 trillion. This is more than three times the U.S. GDP. What this means is that the U.S. would have to pay EVERY dollar it produces for three FULL years in order to repay the debt, which of course is impossible. Debt is the lifeblood of not only the U.S. economy, but also the capitalist world economy, and without it, capitalism would have perished a long time ago. But herein lies the dilemma. On the one hand, an economic system based on debt is unsustainable and will eventually go bankrupt. The government and the capitalists know this. On the other hand, debt is absolutely necessary for capitalism to survive. Why debt is essential to capitalism will form the subject of Part 2, but here it should just be said that since the Great Depression of the 1930’s, politicians and economists have understood that debt is the necessary stimulant of growth under monopoly capitalism, and they have encouraged people, businesses, as well the federal government, to take out more and more debt in order to finance this increasingly frail sand castle called the capitalist economy.The sheer amount of debt involved in this should be a major indication that something is really wrong with this system, but the charade continues. This is not simply a matter of cutting government spending and being fiscally responsible. In this era of neoliberalism, it is easy to point the finger at big brother and blame the government for spending beyond its means, but the reality is that the debt problem pervades every component of this politico-economic system. If the federal budget were balanced tomorrow, it would have little effect on the overall economy. We have to remember that 80% of all economic activity in the U.S.is based on consumption. That means that four out of every five dollars is spent on consumption, a strong indication of the parasitic nature of the U.S. economy. So this is a system that is based on debt-driven consumption in order to grow. If people were to stop borrowing money, due to the relavtive decline of wages and incomes along with the rise of inflation over the decades, consumption would be drastically curtailed and the economy would spiral into a deep recession, perhaps even collapse.

The only solution in the current crisis is for the government, indeed for everybody, to go more into debt. Cutting the budget will only throw the system into an immediate economic tailspin. Unfortunately, for the masters of the world, the jig is up. They know that debt-driven growth is not sustainable and that the ultimate outcome is inevitably bankruptcy. Yet they also understand that more debt is the only thing that can prevent the sand castle of capitalism from collapsing right now. I say, let it fall. It needs to fall sometime and there is no better time than the present. No matter what you believe, the system is in a state of protracted decline right now. We better get everything we can and bail before the collapse comes otherwise you might be buried in the sand.